This month we’ll begin a series of blogs on the new Jumpstart Our Business Startups Act, or JOBS Act, recently passed by Congress.
If you are considering Going Public direct, the JOBS Act makes a number of changes to ease regulatory requirements. If you are considering going public through a reverse merger with a public shell, you need to be careful or you may not be able to take full advantage of the JOBS Act.
Let’s start with the definition of a new class of company created under the JOBS Act called “Emerging Growth Company.”
What does the term “Emerging Growth Company” mean?
In general, the term “emerging growth company” means an issuer that had total annual gross revenues of less than $1,000,000 during its most recently completed fiscal year.
However, you are disqualified from being an Emerging Growth Company if you have ever completed an initial public offering prior to December 8, 2011. This means that if a company has ever previously had any kind of 1933 Act registration statement for its common stock declared effective prior to that date, it cannot use this provision. 1933 Act registration statements include company offerings on Form S-1, selling stockholder offerings on Form S-1, and Employee Benefit Plan offerings on Form S-8. They do not include prior offerings of non-equity securities. They also do not include prior 1934 Act registration statements on Form 10.
The term “initial public offering date” means the date of the first sale of common equity securities of an issuer pursuant to an effective registration statement under the Securities Act of 1933.
For those interested in reverse mergers, this means that if a company merger with a Form 10 virgin shell, can still be considered an Emerging Growth Company under the Act. The same is not true if the merger is with a so called legacy shell which used to have a business but now doesn’t if the legacy shell had ever completed an offering under a prior 1933 Act registration statement prior to December 8, 2011. However, reduced SEC disclosure and related requirements would continue to be available to any company that can meet the definition of Emerging Growth Company at any time, including after its initial public offering.